Is Primary Data About to Pull a $100M Disappearing Act?

Has the storage software startup Primary Data run out of gas…er, money, and gone out of business? Right now nobody seems to know for sure, but the smart money seems to be betting they're gone.

This latest chapter of the Primary Data saga began a week ago when TechCrunch said the company was running in "stealth mode" and "is in the process of shutting down." On Tuesday, The Register called the company DOA (actually, they used a much more colorful description) and said its website's landing page was blank, with interior pages offering 404 "not found" errors.

That must've been temporary. From where I sit, both the landing page and inner pages seem to be working fine. The site was also working for TechTarget's Carol Sliwa on Wednesday, when she wrote an article that noted "news of a Primary Data shutdown spreading across the storage industry."

Sliwa said she managed to reach CEO Lance Smith using his Primary Data office telephone number. "There’s nothing I can comment on at this time," he told her when she asked about the shutdown.

It's not very reassuring when CEOs won't comment on whether their company's doors are open for business.

Primary Data co-founder David Flynn did not respond to multiple attempts to reach him by Data Center Knowledge.

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Over the last four years the startup raised somewhere around $100 million in equity and debt. The latest round was in August when the company raised $20 million in Series C funding, along with an additional $20 million line of credit.

TechCruch opined that easy access to cash might've been part of Primary Data's problem. The Israeli site CTech expressed a similar notion, quoting an unnamed board member as saying, "With too much money, companies lose focus and their sense of urgency when it comes to getting paying customers and selling as a first priority."

There's probably some truth in that. If we learned anything from the dot-com bubble burst nearly 20 years ago, it's that startups perform better if they're kept a bit on the lean and mean side. And when you're a startup and you hire Apple co-founder Steve Wozniak as mascot…er, chief scientist, then you might have too much money in your pocket.

There's also a bit of history repeating here. This isn't co-founders Flynn and Rick White's first trip to the county fair.

In 2006, the pair started another storage-focused company, Fusion-io, which also included Wozniak as chief scientist -- perhaps because Apple was one of their two largest customers. In 2011 the company went public and raised $233 million with a valuation of $1.48 billion, 41 times the previous year's sales. By 2013 share prices had plummeted to 25 percent of the IPO price. The same year, CEO Flynn abruptly resigned from his position, and he and former chief marketing officer White just as abruptly resigned from the company's board.

That story had a better ending than Primary Data seems to be headed toward. In its second quarter 2014 earnings call Fusion-io reported it had twelve customers that ordered over $1 million each, and that summer the company was purchased by SanDisk.

Returning to the present, at least two sites have reported that Primary Data went silent because backers pulled out when they didn't like a company refinancing scheme, which would have reduced the total number of outstanding shares and increase the share price by that same multiple.

The Register saw another possible reason why the company didn't get enough traction to make it over the hill to success: its product perhaps wasn't a good match for a startup:

By now investors are probably hoping that someone will come along and buy what's left of Primary Data. Maybe they'll get some of their money back.